Yesterday's econ data caused a stir in the bond market, forcing yields to break above a key ceiling at .74%.  Can they make it back below that ceiling today or will things go from bad to worse with a break of the next important ceiling at .79%?  The following chart shows the recent drama (I adjusted the lines just slightly to account for the past few days of movement.  They now rest perfectly on closing highs and lows.  That means red candlesticks may be below the bottom line and green candlesticks may be above the top line as long as the top of a red candlestick or the bottom of a green one is inside the trend).

Notice the head-fake breakout late last week and the quick reversal that has followed.  Notably, without yesterday's trading session, there wouldn't be any drama here to discuss.  But the big surprises in econ data caused a rethink of the game plan for bonds.  If the data continues to suggest that bonds have been too gloomy, technical ceilings will continue to be challenged.  The next notable ceiling is at .79%.

That said, several big problems for rates are unrelated to econ data.  These mainly include "supply" concerns with the overt threat from huge Treasury issuance and a more subtle threat from record-setting corporate bond issuance (which puts pressure on other bonds for these reasons).  Mortgage rates are somewhat insulate from all of this for two reasons.  First, MBS tend to outperform when there is Treasury-specific supply pressure.  Second, there is still a much wider-than-normal spread between rates and MBS.  It's the only reason rates moved lower while bonds weakened modestly since late April.   It can continue to tighten, but not quickly.  It's safer to think of it more like a friend that helps make tough times less tough.

Data is fairly light, all things considered, today.  Markets will give some consideration to the European Central Bank press conference this morning, but I think investors are very interested to see the extent to which tomorrow's NFP mimics yesterday's ADP.